The State Bank of Pakistan's total liquid foreign reserves decreased by $294 million to $5.821 billion as a result of debt payment, according to the most recent data released on Thursday.

This only leaves Pakistan with enough imports to last for 1.10 months as its struggling administration tries to meet the nation's complicated external finance requirements.

As of December 23, commercial banks maintained $5.885 billion in foreign exchange reserves.

Over $30 billion in external finance is required this fiscal year by Pakistan to satisfy its current account deficit and debt obligations. Following a deadlock in the ninth review of the programme, planned contributions from the International Monetary Fund (IMF) have remained unchanged.

Over $30 billion in external finance is required this fiscal year by Pakistan to satisfy its current account deficit and debt obligations. Following a deadlock in the ninth review of the programme, planned contributions from the International Monetary Fund (IMF) have remained unchanged.

The 9th review's completion delays, according to analyst Sana Tawfiq of Arif Habib Ltd, have caused the IMF's Extended Fund Facility (EFF) programme to veer off course once more.

In a report, Tawfiq stated that the IMF has expressed concern about the fiscal slippages resulting from a confluence of the destructive floods and a revenue shortfall, particularly from the Petroleum Development Levy (PDL).She added that given the size of the external financing needs, where the majority of the capital was conditioned on an IMF endorsement, survival without the IMF was not an option. There have also been questions over the accuracy of the budgeted flood rehabilitation expenditure.

As of December 23, 2022, data revealed that nation's total foreign exchange reserves to be $11,707.2 million.

Indispensible in the medium- to long-term is the IMF

In FY23, Pakistan's external debt payment obligations totaled $23 billion, of which $4 billion was rolled over and $6 billion was repaid.

Although the government has agreements to cover the remaining sum, delays in the IMF's ninth assessment have called those obligations into question.

Moreover, the foreign account is still in a tight place due to additional repayment obligations of $75 billion throughout FY24–26

Using a combination of bilateral, private debt, and multilateral flows, the government projects disbursements of $103 billion over the course of the next three years to support the repayments and the current account deficit. But to open up these channels, Pakistan must maintain a long-term relationship with the IMF.

Finance Minister allaies concerns about default

Finance Minister Ishaq Dar stated on Wednesday that there was no danger Pakistan would default although acknowledging the country's economy was in a difficult situation.

"Things are tight, but Pakistan will continue to advance. Pakistan won't make a default, he declared.

I acknowledge that our foreign exchange reserves ($24 billion) are not at the same level they were in 2016. However, that is not the government's fault; rather, the system is at fault, and we must make sure that all relevant parties are involved in moving the nation forward.

Dr. Aisha Ghaus Pasha, the minister of state for finance and revenue, earlier today emphasised that Pakistan would not break its international duties and that the government would ensure prompt repayment of the country's external debt.

The state minister said in an interview with journalists in Islamabad that there is "no risk" of Pakistan defaulting because officials were negotiating with Saudi Arabia for a $3 billion loan and the same amount from $3 billion. The minister promised that "we would also make sure that our requirements for foreign debt are met."

"Unsustainable artificial gap"

Analysts were taken aback by the SBP's announcement to lift the import restrictions it placed in May and July 2022 due to declining reserves.

Tawfiq added that in order to control dollar withdrawals, administrative measures such as restrictions on LC opening, import bans, and restrictions on dollar repatriation have been used to artificially manipulate the dollar-rupee parity

She claimed that despite that, a 10-12% disparity between official and unofficial rates has harmed official remittances, which experienced a 10% reduction in 5MFY23.

As the IMF's ninth review comes to an end and additional flows start to materialise, she continued, "We don't regard current restrictions as sustainable and expect the SBP to eventually ease administrative measures."